Monday, May 28, 2012

Well, vintage 2012 is over. A smaller harvest than anticipated, but nice quality fruit to work with. We are pleased to have made some very good wines, and having the nice new winery to work in really made it all go very smoothly. It was a little stressful leading up to vintage, with the builders still working on site just a few days before picking commenced! But in the end it all worked out fine.

The new fermenters shown in the accompanying images worked perfectly and the new sorting table will have helped us take a big step up in quality. The new space has also helped give us the ability to try things we have only dreamed of in the past; for example barrel fermenting some of the varieties.

All in all you can look forward to some very interesting wines from our 2012 efforts.

But, even writing about these exciting developments, brings me back to one of my pet hates - Excise Duty. We have just been advised there will be a further increase in Excise Tax on 1st July.

With what we have just spent in capital improvements, new tanks and new barrels, on top of a small harvest, we really should be thinking about price increase to compensate, however in the current wine market that is just not possible. And the increase in Excise Duty will further erode margins.

Remember this is one of those hidden taxes all governments love. Like Excise Duty on fuel it just keeps money flowing into government revenue in a manner not visible to the general public. And it is linked to the consumer price index, so it increases nicely each year too, another plus for the tax collector. The Excise on wine is now over $2 per bottle and the winery must pay this each time they make a sale. Do the math; if you buy a $10 bottle of wine, over 20% is Excise, add that to the 15% G.S.T. and government is doing very nicely thank you!

So my question is such a tax needed on wine? The answer is no.

Why? Several reasons:
1. It does not make sense to penalise a successful and growing export industry by increasing the cost of doing business in the NZ home market. Almost every successful business starts from a solid platform at home and then pushes out to exports. All that such a tax does is advantage cheap imported wines; be they bulk wines from Australia, or wines from countries with lower production costs or subsidies (like Argentina and Chile), thus impacting the viability of New Zealand wineries.
2. It is a tax burden that unfairly selects just one industry and adds enormously to their operating costs, while other industry sectors avoid it. Plus, the cost of tracking and reporting the excise duty is another burden in an already over-regulated industry
3. It is an indirect tax that could have been phased out and replaced at the introduction of GST, as many other indirect taxes were (e.g. sales taxes). As a consequence it now means consumers end up paying double taxes on all alcoholic beverages, regardless of type, which is clearly unfair

4. Apologists for excise taxes say they are only levied on supposed harmful products (e.g. fuel, tobacco, alcohol, etc) but in fact it is certainly not clear to me that all the excise collected by government is returned the community via initiatives related to the taxed product.
5. On top of that, excise is also a crude tool that does not differentiate between the wide range of alcoholic beverages on the market. It is certainly not the drink of choice for the binge generation; look at alcopops and spirits if you want to address that concern. I accept a new approach is needed to manage alcohol abuse, but why penalise the vast majority of wine-lovers who enjoy and respect wine, by treating them like the problem society really needs to be focused on?

What has been done about the excise tax problem? Well the New Zealand Winegrowers organisation (a body that represents all NZ vineyards), has tried worked hard for change to the excise regime for many years, but to no avail. I know it must be hard negotiating with government officials who fail to see the big picture, but we must persevere.

That's because the consequence of excise continuing to increase each year, will result in more small vineyards in New Zealand failing. To me, continuing a tax that disadvantages Kiwi wineries in so many ways is foolish. It is not being overly pessimistic to point out that unless something changes small family-owned boutique NZ wineries with slim margins are not going to survive. That will not only be to their cost, but also will lead to diminished consumer choice and reduced employment opportunities.

About Me

We are a family owned vineyard in Martinborough, regarded by many as New Zealand's finest Pinot Noir region.
My wife Jill manages the business, I am responsible for sales and exports, and our son Carl makes the wines. We have a great vineyard and office team; Nicola - Carl's partner looks after marketing and sales, Lynn - office' Wonder Woman' looks after all our administration, while Cliff, Dan, Chris and Steve keep our vineyard looking the best in town!
It is a fun place to work, and the wines are pretty good too!